U.S. Treasury yields rose slightly as investors processed recent inflation data and awaited further economic reports, including the producer price index and jobless claims. The 10-year Treasury yield increased by nearly 3 basis points to 4.3%, while the 2-year yield rose over 2 basis points to 4.184%. The recent consumer price index showed a 2.7% annual inflation rate, aligning with expectations. With the Federal Reserve's policy meeting approaching, there's a strong anticipation of a quarter-point rate cut, as traders are nearly certain of this move.
Asia-Pacific markets mostly rose following Wall Street's gains, with the Nasdaq hitting a record high after U.S. inflation data met expectations. Australia's unemployment rate unexpectedly fell to 3.9% in November. Japan's Nikkei and South Korea's Kospi saw significant gains, while China's CSI 300 remained flat. In the U.S., hopes for a Federal Reserve interest rate cut grew as inflation data aligned with forecasts, boosting tech stocks like Nvidia and Tesla. Meanwhile, a Reuters survey indicated most Japanese firms expect negative impacts from Trump's presidency.
European markets edged lower as investors awaited euro zone inflation data, with the Stoxx 600 index down 0.1%. Autos stocks led losses, while mining stocks, including Anglo American, rose. France's inflation rate increased slightly to 1.7% in November, remaining below the ECB's 2% target. Meanwhile, Aviva reportedly approached Direct Line shareholders, potentially signaling a takeover attempt.
Euro zone inflation rose to 2.9% in December, higher than the previous month's 2.4%, but slightly below the forecasted 3%. Core inflation, excluding volatile items like energy and food, showed a slight decrease. The increase in headline inflation is partly attributed to lessening declines in energy prices. This development fuels discussions about the European Central Bank's (ECB) interest rate policies, with markets anticipating rate cuts before summer, despite the ECB's caution due to potential wage pressures and geopolitical risks.
German inflation has unexpectedly risen to 3.8%, dampening hopes for interest rate cuts. This increase puts pressure on the European Central Bank to maintain or even tighten monetary policy to combat rising prices, despite potential impacts on economic growth. The news may concern investors and policymakers who are closely monitoring inflation trends for signs of economic stability.
